Monthly Archives: March 2012

PTC India Financial makes a killing in IEX stake sale

PTC India Financial Services (PFS) has hit a jackpot in a stake sale in Indian Energy Exchange Ltd (IEX). It raised Rs 70.76 crore by selling 14.01 per cent in IEX at Rs 166.51 a share, a price about 50 per cent higher than that in a similar move last year.

But the scrip moved up just by 90 paise to Rs 15.75 on the NSE, though the counter witnessed huge volumes .

What is interesting is that another key promoter of IEX is Financial Technologies, (India) Ltd which has significant stake in Multi Commodity Exchange of India (MCX). The shares of MCX, which recently went public, are trading at a substantial premium to the offer price. IEX is an unlisted entity.

During FY-2011 it had divested part of stake in IEX at Rs 115.41 a share, indicating that the share price has appreciated by nearly 50 per cent since its previous stake sale. The company had acquired its stake in IEX at Rs 10 a share.

PFS, however, did not disclose the identity of the buyer. PFS had earlier sold a 5 per cent stake in IEX to Bessemer Venture Partners and Lightspeed Venture Partners.

According to IEX Web site, while Financial Technologies (India) Ltd was the promoter of IEX, the co-promoter was PTC India Ltd. The key partners/investors in the venture included IDFC, Adani Enterprises, Reliance Energy, Lanco Infratech, Rural Electrification Corporation (REC), Tata Power Company, Lightspeed Venture Partners and Bessemer Venture Partners.

PFS is a non-banking finance company promoted by PTC India Ltd (formerly known as Power Trading Corporation of India Ltd). It holds 60 per cent stake in PFS.
Source: BL

Suzlon Energy CFO quits as losses mount

Suzlon Energy’s chief financial officer has quit as widening losses at the country’s biggest wind-turbine maker jeopardise its ability to meet debt repayments this year.
Robin Banerjee, appointed CFO in March 2009, left to take up an undisclosed position and head of corporate finance Kirti Vagadia will assume his responsibilities, Suzlon said on Friday in an emailed statement. The shares fell to a one-month low.

Suzlon joins Vestas Wind Systems A/S, the world’s largest turbine maker, in losing top managers as increased competition from Chinese rivals squeezes profits and dwindling clean-energy subsidies threaten demand. Vestas CFO Henrik Norremark resigned last month after the Danish company reported a loss four times wider than analyst estimates.

Losses at Suzlon grew to R286 crore ($60 million) in the three months through December, the most in five quarters. That prompted the company’s auditors to examine its ability to raise funds as it seeks to meet debt repayments may fall short by as much as $592 million out of $700 million in debt due in 12 months, Charanjit Singh, a Bangalore-based analyst at HSBC Bank, said this week. The company may face $389 million in bond redemptions this year if investors holding convertible notes choose not to swap them for shares.
Source: Bloomberg

CIL seeks Presidential decree to override Board’s FSA concerns

Coming in the wake of sharp divisions within the Coal India Ltd Board on the issue of guaranteeing fuel supplies to upcoming power projects, the state-owned coal major has now petitioned the government seeking the issuance of a “Presidential Decree” to enable it to sign Fuel Supply Agreements (FSAs) with power units, as directed by the Prime Minister’s Office.

While the Prime Minister’s Office mounting pressure on both CIL and coal ministry to ink firm fuel pacts (FSAs) with new power projects to ensure operations at 80 per cent plant load factor, the CIL Board, which met last evening, remained “sharply divided” on the matter. Some members argued that supplying an assured quantity of fuel cannot be done due to production uncertainties, while other members said since the company is already struggling to honour its existing commitments, “it should not shoulder more burden and invite censure”.

The Board further observed that more than 100 mines of CIL are stuck in no-go areas which has neutralised 400 MT of reserves and their prospects in the near future remains extremely bleak. Although the board approved the draft FSA, yet it has highlighted the grey areas that can trigger serious implications in the due course.

“After a marathon discussion, the CIL Board asked the coal ministry to seek a Presidential Decree (order) specifying that CIL must supply stipulated quantity of fuel at a certain plant load factor,” a senior coal ministry official told The Indian Express. Clause 37 of CIL’s Article of Association empowers the PSU to seek a Presidential order in case the government wants to execute a specific task.

The catch is that if such an order is issued then the maharatna company will have to execute the assigned task, but the government thereafter directly shoulders the responsibility for executing the move.

However, the coal ministry is keenly watching the situation and has asked CIL to intensify in-house preparations for “executing the FSAs at a viable plant load factor level.”

A worried PMO has already told that ministry that paucity of coal may render production of 25,000 MW electricity unviable.

Source: Indian Express

National solar mission: Government says Lanco Infratech flouted norms, but not involved in scam

Lanco Infratech flouted norms of the national solar mission, but made up for it after a warning issued by the government, informed a senior official with the ministry of new and renewable energy. After completing the investigation against Lanco, ministry denies any scam done by the company.

“Lanco had preferential shares in some companies, but after NVVN issued a warning in August 2011, they returned the shares,” said Tarun Kapoor, joint secretary, ministry of new and renewable energy.

The allegation against Lanco was that it had created front companies to bid for solar projects under the Jawaharlal Nehru National Solar Mission (JNNSM).

According to NVVN guidelines, parent company/promoter bidding under the JNNSM needs to have a 51% stake in the bidding company and preferential shares of other partners needs to be less than 49%. Lanco, however, held more than 51% preferential shares in several companies. “According to the legal advisers, such an amount meant carrying voting rights in the parent company, hence Lanco had to surrender its shares,” said an official of NVVN tracking solar mission. NTPC Vidyut Vyapar Nigam (NNVN) is the fully owned power-trading subsidiary of NTPC taking care of the sale and purchase of solar energy generated power.

The official also informed that Lanco returned the 51% preferential shares to the respective promoters of the companies by December 2011. The list of companies signing the PPA (Power Purchase Agreement) with NVVN under the phase 1, batch 1 of national solar mission came out in March 2011, which showed Lanco holding shares in seven companies. It was in August 2011, when NVVN investigated and issued notice against Lanco for violating the guidelines.

“According to the NVVN’s guidelines, if a default is reported against a participant company in the JNNSM, it is given a warning to correct it. Once corrected, it can very well go ahead,” said Kapoor.

Ministry, however, maintains it stand on the fictitious commissioning of solar power projects by Lanco in Rajasthan.

It encashed the bank guarantee of the projects procured by Lanco which failed to meet the deadline of commissioning solar power projects in Rajasthan under JNNSM.

“For four projects, 100% bank guarantee has been encashed which amounts to around 10 crore,” said Kapoor. Learning from the Lanco experience, NVVN has come up with stricter guidelines, especially regarding share holding pattern of the parent company. “NVVN has been extra cautious since then. It has decided the parent company’s share (sum total of equity and preferential share holding) should be more than 49%,” said Kapoor.

A senior NVVN official also told that the maximum limit of bidding was increased from 5 MW each in batch 1-50 MW each in batch 2 of phase 1 so that no illegal ways are taken to procure more projects. Lanco’s spokesperson denied to speaking on the issue saying that no official comment can be given unless they have the report in front of them. The investigative report, delayed by one month, is due to be released in the first week of April.

Source: ET

NTPC commissions 500-MW Simhadri unit

The country’s largest power producer, NTPC Limited, stated that it has commissioned the fourth 500-Mw unit of its Simhadri Super Thermal Power Project on Friday.

With this unit, the total installed operational capacity of NTPC- Simhadri has now gone up to 2,000 Mw. The Simhadri project is situated at Parawada near Visakhapatnam in Andhra Pradesh.

Power generated from Simhadri Stage-II will be supplied to the southern states of Andhra Pradesh (384.4 Mw), Karnataka (176 Mw), Kerala (80 Mw), Tamil Nadu (197 Mw) and Puducherry (10 Mw), while 150 Mw is unallocated.

On the other hand, NTPC stated in a press release that the entire 1,000-Mw power generated from Simhadri Stage-I (2 x 500 Mw) 1000 MW is supplied to Andhra Pradesh.

According to NTPC, Simhadri is its first coastal-based, coal-fired thermal power project. The biggest sea water intake well in India has been installed inside the Bay of Bengal to draw water for condenser-cooling and ash disposal. Natural draft cooling towers of (165 M) height each are the biggest in Asia and the sixth biggest in the world.

Source: Business Standard

A massive coal pitfall for India’s industrial ambitions

Ten years after announcing the project, Jindal Power and Steel is still waiting to start digging for coal to fuel its $3.1 billion steel and power complex in Orissa state.

The project is one of several industrial ventures mired in a bureaucratic morass that contributes to the massive power shortages plaguing India, dulling its investment appeal and slowing the growth of Asia’s third largest economy.

The obstacles include tardy environmental clearances and complex land acquisitions, as well as populist policies that often mean hefty losses for power utilities.

The Jindal project also now risks being held up by what may become another corruption scandal for Prime Minister Manmohan Singh, after a report by the federal auditor accused the coalition government of giving up $211 billion in potential revenues by selling coal assets too cheaply.

India sits on the world’s fifth-largest coal reserves, and produces the most after China and the United States.

But it also imported about 80 million tonnes of coal for power last year and that figure could rise to 400 million tonnes in 2030, research consultants Wood Mackenzie said.

“The problem is the entire process takes time, every approval – be it forest clearance, be it land acquisition, be it rehabilitation,” Rajesh Jha, executive director of Jindal Steel and Power’s (JNSP.NS) Orissa plant, told Reuters.

The government, however, can ill-afford to take its time if it wants to maintain economic growth.

NO POWER FOR THE PEOPLE

Coal accounts for more than half of India’s power generation and will be required for 85 percent of the 76,000 megawatts additional capacity targeted in the next five years.

But domestic supply has fallen short of targets largely due to regulatory hurdles, and poor infrastructure hinders the transport of imported coal.

The country has a power shortfall which at its peak can hit 11 percent with frequent power cuts, especially outside cities.

Power shortages are one of the greatest obstacles to developing the Indian economy, the World Bank says, dimming the nation’s hopes of competing with China, the world’s largest consumer goods manufacturer and its biggest producer of coal.

Industrialists say the answer lies in attracting more private investment into the coal sector, which is dominated by state-owned supplier Coal India.

Singh’s government tried to jumpstart that process during its first term in office, when, between 2004 and 2009, it sold 155 coal blocks at a nominal price to industrial projects as captive supplies. These are now being questioned by the federal auditor.

“When companies are struggling for coal and not able to explore coal blocks allotted to them, a report like this will further worsen the situation,” said a Jindal executive who declined to be named because he was not authorised to speak on behalf of his company.

Allegations of misspent funds are particularly emotive in a country where about half a billion are poor and rely on state subsidies for food and power.

Singh’s office has denied any wrongdoing in the coal row, but the charges of corruption have further weakened a government which in February was ordered by a court to cancel more than 100 telecoms licences after the auditor said they were sold too cheaply.

The government has awarded a net total of 195 blocks with reserves of 44.23 billion tonnes to industrial projects, but only 28 of these are operating, with current output just 38 million tonnes a year, a coal ministry source said.

Jindal’s Utkal B-1 coal block highlights much of what is wrong with India’s coal sector.

Assigned in 2003 and due to start production two years ago, the site has 140 million tonnes of coal reserves. But not even a boundary fence marks the area because the company is locked in a dispute with farmers who once owned the land but who now refuse to leave it, saying the price initially agreed was too low.

As a result the project’s 810 megawatt power plant operates at about a third of its capacity using coal bought from state-run Coal India at an average price of 3,000 rupees per tonne currently — costing $142 million a year, according to Jindal’s Jha. The costs of the captive coal should be a third of that, Jha said.

He says Jindal now believes it can get the mine producing by September.

The same problems plaguing private miners have also led Coal India – which produces 80 percent of the country’s coal – to cut output targets to 440 million tonnes in 2011/12 from initial hopes of 520 million tonnes.

Coal mining in India is such hard work, said a senior executive at a private power firm, that the auditors’ estimate of $211 billion in lost mining revenue was simply unrealistic.

“Tell me, if there is so much money to be made from mining coal in India, if it is so easy, why then is Coal India struggling to produce enough to supply the country,” said the executive, who declined to be named as he did not want to be seen criticising the government.

Source: Reuters

PowerGrid south bags award

PowerGrid’s southern region transmission system-II has been conferred with the national award for meritorious performance in power transmission ‘system availability.’ The award has been instituted by the Union Ministry of Power for the year 2010-11.

Mr R.N. Nayak, CMD, PowerGrid, and Mr Bharat Bhushan, Executive Director PowerGrid-SRTS-II, received the award from Mr Sushilkumar Shinde, Union Minister of Power.

National awards to power utilities for meritorious performance have been instituted by the ministry to inculcate competitive spirit and to motivate the power utilities to achieve higher levels of performance.

Source: BL

Government may issue Presidential directive to Coal India on fuel issue

 Government may issue Presidential direction to Coal India next week if the PSU does not follow the PMO directive to sign with power producers fuel supply agreement, with 80 per cent assured delivery, sources said.

The Coal Ministry has already conveyed to the Coal India Ltd (CIL) that it must sign the Fuel Supply Agreement (FSAs) with the power firms, notwithstanding opposition from several CIL independent directors, they said.

“The government has made its stance very clear (even though) the decision on 80 per cent trigger is deferred for the moment,” a high level Coal Ministry official said.

CIL has sought more time to work out agreement with the consumers from the power sector, while efforts are on to convince the independent directors to agree to the clause under which if supply falls below 80 per cent, the coal producer will have to pay a penalty.

Against the backdrop of acute fuel crunch faced by power firms, the Prime Minister’s Office (PMO) held recently held a meeting with representatives of the power firms. It also directed CIL to sign the FSAs with the power firms.

However, the move on assured supply has been questioned by several independent directors of CIL and a UK-based minority shareholder, TCI.

The President of India can issue directives to the conduct of CIL’s business as long as it is a government company. The government can also issue instructions to CIL board according to its Memorandum of Association. Such a directive will have to be accepted “on account of public interest.”

The deadline set by the PMO for signing of the FSA is expiring tomorrow.

Source: ET

India Signs Three Loan Agreements with ADB Worth US $826 Million for Facilitating Power Transmission within India

The Asian Development Bank (ADB) and the Government of India today signed three loan agreements worth $826 million aimed at shoring up power transmission systems to help India efficiently transfer electricity from surplus regions to power-deficit regions.

A $500 million sovereign-guaranteed loan and a $250 million non-sovereign corporate loan will establish a 1,300-plus kilometer inter-regional transmission link to allow the bulk transfer of electricity from independent power producers in the western state of Chhattisgarh to areas of high demand in the north, including the National Capital Territory Region of Delhi. The third loan of $76 million (sovereign) will connect the western grid region to the union territories of Daman and Diu and Dadra and Nagar Haveli.

Mr. Venu Rajamony, Joint Secretary (Multilateral Institutions) in the Department of Economic Affairs, Ministry of Finance, signed guarantee agreements on behalf of Government of India and Mr. R.N. Nayak, Chairman and Managing Director, POWERGRID signed the loan agreements. Mr. Rana Hasan, Principal Economist, India Resident Mission, signed the guarantee and loan agreements on behalf of ADB.

Speaking on the occasion, Shri Rajamony said that this is a pioneering initiative to club a non-sovereign loan of US$ 250 million with a sovereign loan of US$ 500 million in one financing package. The combined loan will significantly strengthen Power Grid’s corporate credit capabilities and access to future foreign commercial borrowings in the international capital market, he said. He added that this loan sets a benchmark for future commercial lending not only to Power Grid but all Central Public Sector Undertakings.

Mr. Rana Hasan from ADB stated that the Project will strengthen the national power grid through achieving enhanced transmission capacity and reliability of supply. At the same time, they will cater to the growing demands in the Western and Northern regions of India through facilitating electricity transfer from surplus regions to power-deficient regions, he said.

The first two loans to the central transmission utility, Power Grid Corporation of India Limited (POWERGRID), are bundled together to help leverage interest from foreign commercial lenders and move POWERGRID from sovereign funding to more market-based capital raising. The non-sovereign loan of up to 15 years will be POWERGRID’s first large-scale foreign commercial term borrowing without government credit support.

The sovereign loans will have a 25-year term, including a five-year grace period with an annual interest rate determined in accordance with ADB’s LIBOR-based lending facility.

POWERGRID plans to invest about $22 billion to more than double the size of its transmission network between now and 2017, thereby expanding its funding base from the present sources of domestic bonds and government-guaranteed loans to the new foreign commercial borrowing.

Source: Press Information Bureau

Power to cost more in AP for all segments

Power consumers across segments — domestic, low tension and high tension industrial segments, in Andhra Pradesh are in for tariff hike from April 1.

DOMESTIC CONSUMPTION

The Andhra Pradesh Electricity Regulatory Commission (APERC) today approved the new tariff order which levies higher rates starting from domestic power consumers above 50 units a month where the tariff has been raised from Rs 2.60 a unit last year to Rs. 2.80 a unit.

Only those who consume less than 50 units a month have been spared. This category will pay Rs 1.45 a unit.

INDUSTRIES

For industrial consumers, the tariff has been hiked from Rs 4.13 a unit last year to Rs 5 a unit.

Corporate farmers and IT assesses have been levied charges of Rs 2.50 a unit. The tariff for cottage industries too, depending upon the sector such as poultry farms, agro-based activity, now face higher tariffs.

While the distribution companies had raised a total demand of Rs 36,090 crore for 2012-2013, the regulator has allowed total revenue of Rs 34,343 crore. This includes the subsidy component of Rs 5,358 crore and Rs 28,985 crore for distribution companies from tariffs collected.

The increase in tariff goes against the promise made by the late Y.S. Rajasekhara Reddy when he came back to power in 2009 that there would be no tariff hikes for next five years.

The order mentions that Fuel Surcharge Adjustment (FSA) is applicable to all categories.

Source: BL

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